ALMOST THREE-QUARTERS of our tax revenue derives from a combination of excise duties, VAT, and income tax. But in the decade between 1997 and 2007 the proportion of national output raised in the form of income taxation - which bears more heavily on the well- to-do than on the less-well-off - was steadily reduced, eventually by one-third.

The tax burden was thus neatly shifted to expenditure taxes (VAT and excise duties), which, in contrast to income tax, bear somewhat more heavily on the less-well-off - for people with lower incomes spend almost all of their income - and fall less heavily on better- off people who can afford to save. This shift in the tax burden made our already inequitable society even more unjust.

Moreover, as the huge cuts in income tax were largely financed from stamp duties and capital gains tax deriving from the housing bubble (an essentially temporary bulge), our capacity to maintain public and social services was hugely undermined by this grossly irresponsible bout of populist tax-cutting.

This policy, pursued without any serious criticism or even comment by most economists - or indeed by trade unions - has led to a situation where the majority of our taxpayers last year paid income tax at rates that are between one-quarter and one-half of the rates charged on such incomes in every other western European country, and in the USA. Only at higher income levels do our tax rates now come anywhere near those of other western European levels, although still about one-quarter lower than elsewhere.

As a result of this under-taxation, I estimate we are short some [euro]4 billion in tax revenue. That is why we are being forced to go well beyond necessary changes in public sector numbers and pay rates by also being asked to accept anti-social cuts in our already grossly inadequate health and education services.

The relevant facts on our under-taxation are set out in the accompanying table, which presents data on income tax plus PRSI paid by employees last year. (The percentages of incomes absorbed by income tax and PRSI are, of course, 1 per cent higher today because of the new levy).

These figures are based on data furnished by governments, and they cover three income levels, ranging from two-thirds to one-and- two-thirds times the average wage.